Mattersight Announces Fourth Quarter 2013 Results

Mattersight Announces Fourth Quarter 2013 Results  CHICAGO, IL -- (Marketwired) -- 02/12/14 --  Mattersight Corporation (NASDAQ: MATR) today announced financial results for the fourth quarter ended December 31, 2013.   Mattersight's total services revenue was $9.2 million, including $7.6 million of subscription revenue. The Company realized an "Adjusted Earnings(1)" profit of $0.8 million for the fourth quarter of 2013. Adjusted Earnings is a non-GAAP measure. For a reconciliation of operating loss to Adjusted Earnings, see the accompanying schedule. Mattersight's net loss was $1.5 million in the fourth quarter of 2013.   Q4 Highlights      --  Achieved record revenues of $9.2 million --  Achieved $0.8 million of adjusted earnings --  Attained record gross margins of 75% --  Booked contracts with incremental ACV of $2.0 million --  Signed twenty-five new pilots, including twenty-two routing pilots;     fifteen of these pilots are new logos --  Ended the quarter with a record fifty-four pilots     Conference Call Information  Mattersight management will host a conference call at 5:00 p.m. ET on Wednesday, February 12, 2014. The conference call and slide presentation will be available at the Investment Community section of Mattersight's website at http://www.mattersight.com/investment/. To listen to the conference call via telephone, please call 800.952.4789 (domestic) or 404.665.9579 (international), conference ID: 41324412.  For those who cannot access the live broadcast, a replay of the conference call will be available beginning approximately two hours after the live call is completed until March 12, 2014, by dialing 855.859.2056 (domestic) or 404.537.3406 (international), conference ID: 41324412.   Safe Harbor for Forward-Looking Statements  Statements in this press release that are not historical facts are "forward-looking statements" that are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements, which may be identified by use of words such as "plan," "may," "might," "believe," "expect," "intend," "could," "would," "should," and other words and terms of similar meaning, involve risks and uncertainties that could cause actual results to  differ materially from those described in the forward-looking statements. In addition to other factors and matters contained or incorporated in this document, important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements include, among other things, the risks detailed from time to time in Mattersight's SEC filings. You can locate these filings on the Investor Relations page of Mattersight's website, www.mattersight.com. Statements included or incorporated by reference into this press release are based upon information known to Mattersight as of the date of this press release, and the company assumes no obligation to publicly revise or update any forward-looking statement for any reason.  About Mattersight  Mattersight is a leader in enterprise analytics focused on customer and employee interactions and behaviors. Mattersight(R) Behavioral Analytics captures and analyzes customer and employee interactions, employee desktop data, and other contextual information to optimally route customers to the best available employee, improve operational performance, and predict future customer and employee outcomes. Mattersight's analytics are based on millions of proprietary algorithms and the application of unique behavioral models. The company's SaaS+ delivery model combines analytics in the cloud with deep customer partnerships to drive significant business value. Mattersight's solutions are used by leading companies in Healthcare, Insurance, Financial Services, Telecommunications, Cable, Utilities, Education, Hospitality, and Government. See What Matters(TM) by visiting www.Mattersight.com.   (1) Mattersight presents Adjusted Earnings, a non-GAAP measure that represents cash earnings performance, excluding the impact of non-cash expenses and expense reduction activities, because management believes that Adjusted Earnings provide investors with a better understanding of the results of Mattersight's operations. Management believes that Adjusted Earnings reflect Mattersight's resources available to invest in its business and strengthen its balance sheet. In addition, expense reduction activities can vary significantly between periods on the basis of factors that management does not believe reflect current-period operating performance. Although similar adjustments for expense reduction activities may be recorded in future periods, the size and frequency of these adjustments cannot be predicted. The Adjusted Earnings measure should be considered in addition to, not as a substitute for or superior to, operating income, cash flows or other measures of financial performance prepared in accordance with GAAP.                                                                                                              MATTERSIGHT CORPORATION                                                CONSOLIDATED STATEMENTS OF OPERATIONS                                 (Unaudited and in thousands, except per share data)                                                                                                                                  For the               For the                                         --------------------  ---------------------                                   Three Months Ended    Twelve Months Ended                                   --------------------  ---------------------                                   Dec. 31,   Dec. 31,   Dec. 31,   Dec. 31,                                      2013       2012       2013       2012                                     ---------  ---------  ---------  ---------- Revenue:                                                                       Behavioral Analytics revenue   $   8,938  $   8,343  $  33,005  $  32,138    Other revenue                        233        285      1,206      1,314                                   ---------  ---------  ---------  ----------     Total services revenue           9,171      8,628     34,211     33,452    Reimbursed expenses                   96         97        283        411                                   ---------  ---------  ---------  ---------- Total revenue                        9,267      8,725     34,494     33,863  Operating expenses:                                                            Cost of Behavioral Analytics                                                  revenue                           2,181      3,245     10,139     12,208    Cost of other revenue                100        156        617        702                                   ---------  ---------  ---------  ----------     Cost of services                 2,281      3,401     10,756     12,910    Reimbursed expenses                   96         97        283        411                                   ---------  ---------  ---------  ---------- Total cost of revenue, exclusive                                              of depreciation and                                                          amortization shown below:           2,377      3,498     11,039     13,321    Sales, marketing and                                                          development                       5,250      6,571     21,752     23,142    General and administrati ve         2,156      2,341      8,781      8,255    Severance and related costs           --         --        154        693    Depreciation                         764        915      3,450      3,419    Amortization of intangibles          (77)        17         66         81                                   ---------  ---------  ---------  ---------- Total operating expenses            10,470     13,342     45,242     48,911                                   ---------  ---------  ---------  ----------                                                                              Operating loss                      (1,203)    (4,617)   (10,748)   (15,048) Interest and other expense, net       (346)       (81)      (659)      (384)                                  ---------  ---------  ---------  ---------  Loss from continuing operations                                               before income taxes                (1,549)    (4,698)   (11,407)   (15,432) Income tax benefit (provision)          15         (8)       244        (38)                                  ---------  ---------  ---------  ---------  Loss from continuing operations     (1,534)    (4,706)   (11,163)   (15,470) Income from discontinued                                                      operations, net of tax                 --         21         --        249                                   ---------  ---------  ---------  ---------  Net loss                            (1,534)    (4,685)   (11,163)   (15,221) Series B Stock fair value over                                                stated value                           --         --         --        (69) Dividends related to Series B                                                 Stock                                (148)      (147)      (589)      (591)                                  ---------  ---------  ---------  ---------  Net loss available to Common                                                  Stock holders                   $  (1,682) $  (4,832) $ (11,752) $ (15,881)                                  =========  =========  =========  =========                                                                               Per share of Common Stock:                                                   Basic loss from continuing                                                    operations                      $   (0.10) $   (0.30) $   (0.70) $   (1.01)                                  =========  =========  =========  =========  Basic income from discontinued                                                operations                      $      --  $      --  $      --  $    0.02                                   =========  =========  =========  =========  Basic net loss available to                                                   Common Stock holders            $   (0.10) $   (0.30) $   (0.70) $   (0.99)                                  =========  =========  =========  =========                                                                               Per share of Common Stock:                                                   Diluted loss from continuing                                                  operations                      $   (0.10) $   (0.30) $   (0.70) $   (1.01)                                  =========  =========  =========  =========  Diluted income fro m discontinued                                              operations                      $      --  $      --  $      --  $    0.02                                   =========  =========  =========  =========  Diluted net loss available to                                                 Common Stock holders            $   (0.10) $   (0.30) $   (0.70) $   (0.99)                                  =========  =========  =========  =========                                                                               Shares used to calculate basic                                                net loss per share                 17,342     16,223     16,722     16,002                                   =========  =========  =========  =========  Shares used to calculate diluted                                              net loss per share                 17,342     16,223     16,722     16,002                                   =========  =========  =========  =========                                                                               Stock-based compensation,                                                     primarily restricted stock, is                                               included in individual line                                                  items above:                                                                  Cost of Behavioral Analytics                                                  revenue                       $      59  $       2  $     267  $      16    Sales, marketing and                                                          development                         780        530      3,874      2,308    General and administrative           498        349      2,151      1,405    Severance and related costs           --         --         29        268                                                                                                                                                                                                                                                                   MATTERSIGHT CORPORATION                                           CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS                                         (Unaudited and in thousands)                                                                                                                                              For the               For the                                         --------------------  --------------------                                    Three Months Ended    Twelve Months Ended                                   --------------------  --------------------                                    Dec. 31,   Dec. 31,   Dec. 31,   Dec. 31,                                      2013       2012       2013       2012                                     ---------  ---------  ---------  ---------  Net loss                         $  (1,534) $  (4,685) $ (11,163) $ (15,221) Other comprehensive loss:                                                     Effect of currency translation           6          2          6         (1)                                  ---------  ---------  ---------  ---------  Comprehensive net loss           $  (1,528) $  (4,683) $ (11,157) $ (15,222)                                  =========  =========  =========  =========                                                                                                                                                                                                                                                                   MATTERSIGHT CORPORATION                                                    CONSOLIDATED BALANCE SHEETS                                 (Unaudited and in thousands, except share and per share data)                                                                                                                                    December 31,    December 31,                                                     2013            2012                                                    --------------  --------------                     ASSETS:                                                   Current Assets:                                                                Cash and cash equivalents                  $       13,392  $       14,419    Receivables (net of allowances of $12 and                                     $12)                                               2,384           2,568    Prepaid expenses                                    3,576           4,359    Other current assets                                  427             305                                               --------------  --------------      Total current assets                             19,779          21,651  Equipment and leasehold improvements, net             5,158           4,727  Goodwill                                                972             972  Intangibles, net                                        409              236  Other long-term assets                                4,431           3,776                                               --------------  --------------      Total assets                             $       30,749  $       31,362                                               ==============  ==============                                                                                   LIABILITIES AND STOCKHOLDERS' EQUITY:                                    Current Liabilities:                                                           Short-term debt                            $           --  $        3,703    Accounts payable                                      752             781    Accrued compensation and related costs              1,118           1,335    Unearned revenue                                    7,215           5,853    Other current liabilities                           4,098           2,889                                               --------------  --------------      Total current liabilities                        13,183          14,561  Long-term unearned revenue                            2,866           2,374  Other long-term liabilities                           1,607           1,231                                               --------------  --------------      Total liabilities                                17,656          18,166                                               --------------  --------------                                                                               Series B Stock, $0.01 par value; 5,000,000                                    shares authorized and designated; 1,649,122                                  and 1,649,201 shares issued and outstanding                                  at December 31, 2013 and December 31, 2012,                                  respectively, with a liquidation preference                                  of $9,294 and $8,705 at December 31, 2013                                    and December 31, 2012, respectively                  8,411           8,411                                                                               Stockholders' Equity:                                                          Preferred stock, $0.01 par value;                                             35,000,000 shares authorized; none issued                                    and outstanding                                       --              --    Common Stock, $0.01 par value; 50,000,000                                     shares authorized; 20,465,984 and                                            18,407,848 shares issued at December 31,                                     2013, and December 31, 2012,                                                 respectively; and 18,886,966 and                                             17,114,880 outstanding at December 31,                                       2013 and December 31, 2012, respectively             205             184    Additional paid-in  capital                        228,755         216,667    Accumulated deficit                              (212,163)       (201,000)   Treasury stock, at cost, 1,579,018 and                                        1,292,968 shares at December 31, 2013 and                                    December 31, 2012, respectively                   (8,082)         (7,027)   Accumulated other comprehensive loss               (4,033)         (4,039)                                              --------------  --------------      Total stockholders' equity                        4,682           4,785                                               --------------  --------------      Total liabilities and stockholders'                                           equity                                  $       30,749  $       31,362                                               ==============  ==============                                                                                                                                                                                                                                                                   MATTERSIGHT CORPORATION                                               CONSOLIDATED STATEMENTS OF CASH FLOWS                                             (Unaudited and in thousands)                                                                                                                                                               For the                                                          ------------------------------                                                     Twelve Months Ended                                                    ------------------------------                                                December 31,    December 31,                                                     2013            2012                                                    --------------  --------------  Cash Flows from Operating Activities:                                          Net loss                                   $      (11,163) $      (15,221)   Less: net income from discontinued                                            operations                                            --             249                                               --------------  --------------    Net loss from continuing operations               (11,163)        (15,470)   Adjustments to reconcile net loss from                                        continuing operations to net cash                                            provided by (used in) operating                                              activities:                                                                   Depreciation and amortization                     3,516           3,500      Stock-based compensation                          6,292           3,729      Severance and related costs                          29             268      Change in fair value of warrant                                               liability                                          125              --      Other                                                 2               2    Changes in assets and liabilities:                                             Receivables                                         184             (27)     Prepaid expenses                                    739           1,879      Other assets                                       (112)            (50)     Accounts payable                                    (29)            (31)     Accrued compensation and related costs             (217)            (47)     Unearned revenue                                  1,854          (4,592)     Other liabilities                                   330            (177)                                              --------------  --------------        Total adjustments                              12,713           4,454                                               --------------  --------------          Net cash provided by (used in)                                                continuing operations                        1,550         (11,016)         Net cash provided by discontinued                                             operations                                      --              24                                               --------------  --------------          Net cash provided by (used in)                                                operating activities                         1,550         (10,992)                                              --------------  --------------  Cash Flows from Investing Activities:                                          Capital expenditures and other                     (1,233)         (2,081)   Patents and trademarks                               (239)            (79)                                              --------------  --------------          Net cash used in continuing                                                   investing activities                        (1,472)         (2,160)         Net cash used in discontinued                                                 investing activities                            --              --                                               --------------  --------------          Net cash used in investing                                                    activities                                  (1,472)         (2,160)                                              --------------  --------------  Cash Flows from Financing Activities:                                          Proceeds from issuance of Common Stock,                                       net                                                5,621              --    Proceeds from line of credit                        2,400           3,691    Repayments from line of credit                     (6,096)             --    Principal payments under capital lease                                        obligations                                       (2,117)         (2,311)   Acquisition of treasury stock                      (1,055)         (1,136)   Proceeds from stock compensation and                                          employee stock purchase plans, net                   138             802    Proceeds from issuance of stock warrants                4              --    Fees from issuance of Common Stock                     --             (49)   Decrease in restricted cash                            --           1,500    Purchase of shares of Series B Stock                   --          (3,743)   Payment of Series B Stock dividends                    --            (595)                                              --------------  --------------          Net cash used in continuing                                                   financing activities                        (1,105)         (1,841)         Net cash used in discontinued                                                 financing activities                            --              --                                               --------------  --------------          Net cash used in financing                                                    activities                                  (1,105)         (1,841)                                              --------------  --------------  Effect of exchange rate changes on cash and                                   cash equivalents by continuing operations               --               4  Effect of exchange rate changes on cash and                                   cash equivalents by discontinued operations             --              --                                               --------------  --------------  Effect of exchange rate changes on cash and                                   cash equivalents                                        --               4                                               --------------  --------------  Decrease in cash and c ash equivalents                (1,027)        (14,989) Cash and cash equivalents, beginning of                                       period                                              14,419          29,408                                               --------------  --------------  Cash and cash equivalents of continuing                                       operations, end of period                   $       13,392  $       14,419                                               ==============  ==============                                                                                                                                                                                                                     For the                                                          ------------------------------                                                     Twelve Months Ended                                                    ------------------------------                                                December 31,    December 31,                                                     2013            2012                                                    --------------  --------------  Non-Cash Investing and Financing                                              Transactions:                                                                 Capital lease obligations incurred         $        2,973  $        1,793    Capital equipment purchased on credit               2,973           1,793    Fair value of warrants classified as                                          liability                                            785              --  Supplemental Disclosures of Cash Flow                                         Information:                                                                  Interest paid                              $          403  $          371                                                                                                                                                                                                                                                                   MATTERSIGHT CORPORATION                                              CALCULATION OF ADJUSTED EARNINGS MEASURE                                           (Unaudited and in thousands)                                                                                                                                              For the               For the                                         --------------------  --------------------                                    Three Months Ended    Twelve Months Ended                                   --------------------  --------------------                                    Dec. 31,   Dec. 31,   Dec. 31,   Dec. 31,                                      2013       2012       2013       2012                                     ---------  ---------  ---------  ---------  GAAP -- Operating loss           $  (1,203) $  (4,617) $ (10,748) $ (15,048)                                                                              Add back (reduce) the effect of:                                             Stock-based compensation             1,337        881      6,292      3,729  Severance and related costs             --         --        154        693  Depreciation and amortization          687        932      3,516      3,500                                   ---------  ---------  ---------  ---------  Adjusted earnings measure --                                                  earnings (loss)                 $     821  $  (2,804) $    (786) $  (7,126)                                  =========  =========  =========  =========      Contact Mark Iserloth Vice President and Chief Financial Officer 312.454.3613 ir@mattersight.com